Ceptinel Revenue, Valuation & Funding (2024)

hello everyone my guest today is miguel buhultz he is the he has 12 years of software engineering experience and six as an entrepreneur founding his current company variety code which is a itas co-founding tootin.cl and uber for last mile operation organ optimization uh sas for big companies and ceptinio a sas regtech that helps financial institutions fight corruption money laundering and fraud miguel you ready to take us to the top yeah i'm ready all right so variacode.com that's [Music] v-a-r-i-a-code.com help us understand what's the company doing who are you selling to yeah well we export we're based in chile we export about 80 percent to the us and what we do is we help companies to have a partner in it devops uh sre uh you know as a service so it means we provide a flat fee for that kind of services okay and okay so this is not a sas business now it's it's not a sas business uh vera code but the the one that is assassin's business is uh septino september is a child of baracode um septinelle was uh founded about three years ago and received one million dollar investment from uh hcs capital based in miami and that that is a sas business uh and it's a child of virgo let's talk let's focus on centennial then so what does the company do and and what do you sell yeah basically what we sell we sell a software that uh as a service that provides uh financial institutions with uh rec tech capabilities rec tec is a very new term that is a subset of fintech basically what it does is helps automate uh regulation compliance for financial institutions and can you maybe talk about how specifically how a customer uses you can you name a customer yeah of course um we have one customer one big customer that that is uh la royale usually our customers are brokerage houses or stock exchanges or banks we have about six customers are here in chile and uh basically what we do is we provide them with a sas that has a visual programming so they can create all the compliant rules for let's say anti-fraud uh let's say uh anti-money laundering um and and uh a lot more uh rules that usually the um the regulators ask this financial institutions and what do these six customers pay you per month on average for this yeah uh it's it's on average it's a thousand dollars and on top of that we provide uh perfect uh uh professional services like if a customer doesn't know how to create those rules we can provide people to do to do that and help okay so the business was founded in 2017 today has six customers and you're doing about six thousand dollars a month in pure sas revenue is that right yeah when you add on professional services revenue how much revenue does the company do about 10k per month okay so 4 000 a month in professional services now you raised a million bucks to build this company so does it make i mean how big do you have to grow the company so that you can get your investors a return um [Music] to to reach a equilibrium i will say we need to sell about two or three more clients and and with that the company set right now we have all the all the years set so um i will say we are fine for the year but uh um but and i and i think the company is going to be ready to to to kind of reach equilibrium probably by the end of this year what do you mean miguel what do you mean equilibrium i am sorry just uh i'm a developer so i i am not a business person i mean all the costs are going to be um uh are going to be uh europe you're talking break even uh break even yes so how much money are you burning how much money are you losing per month right now about 15k five zero or one five uh one five okay fifteen thousand and okay but that still doesn't answer the question how big do you think you have to grow the company to earn your investors a return they put money a million dollars in at a certain valuation yeah but that's a tricky question i will say i will say um i will say we need to grow about about eight times i will say but to to get what it expected of the company but reaching break even i will say the investors will be cool about it but you know being cool about that company is it's not a great investment so i will say uh eight times is the number eight so grow your revenue eight times yeah yeah okay so so um and and why do you feel like that's the number where investors will go okay you know basically what you're optimizing for is either you have to sell the company to get your investors a return or you have to do a bigger round of financing and just keep i mean you're on the venture track at this point right so i assume you want to keep growing and not exit in a year yeah now exit is expected in about five to ten years as i will say kind of the normal between quotes life cycle of a startup um so so we expect more rounds but we are really expecting to continue uh from now on trying to do bootstrapping that is trying not to have more invest investment rounds uh because we simply don't do nothing it's necessary um we we think the the all the tendency to uh for automation uh it's it's it's kind of setting in the world right now so everyone is actually still looking at value in automation miguel if you're doing six thousand dollars a month today in revenue what were you doing a year ago a year ago was um like uh three thousand dollars a month so so and how much of the million dollars have you spent so far i will say we are in about um 70 percent you've spent 70 percent yeah so uh so a year ago you were doing three grand a month today you're doing six grand a month so you've spent seven hundred thousand dollars to add three thousand dollars a month in new revenue we actually we actually spent um that amount in two years because we we got about two years ago the investment and and two years ago we didn't have any revenue at all we have like a thousand dollars well miguel still i mean you're an engineer do the math you spent seven hundred thousand dollars and you now have a six you're just i mean you're doing six thousand dollars a month in revenue that's nothing yeah yeah i know i know um i know you're uh i get your point and it's it's completely valid uh the the whole the whole idea of this investment was to uh get a better product and right now i will say after a year and a half we do have a product that is a package that we can actually deliver to clients and it's going to function fully automatic so it wasn't the main reason to to get more clients the main reason for that investment was to get a better product but isn't the ultimate isn't the ultimate measurement of a better product if people are willing to pay for it you only have six people that are willing to pay a thousand dollars a month for this product you spent almost a million dollars building yeah you're correct you're correct and we're seeing that in this year actually 2020 has been the the best year um we in order to get to three clients it took us about a a year and a half in order to get to to the next six clients and i'm talking b2b financial clients the the times to get those clients vary from um six months to 12 months it's a very very rough um uh clientele so we in in the third of the time we got three more clients and now we are actually i will say is the first time in this company we have this many prospects like valid valid actual prospects we have um we have a a very big uh chunk of possible clients right now and we have never seen that before actually prospects are coming to us that is something uh in previous years uh didn't happen so i will say uh uh i will say things are tuning up uh very good this year um for us uh um independent from the situation the world is is situated yeah i understand you're in a space that requires a lot of investment to get a minimum viable product out you've got to have security things in place the technology's got to be in place you've got to add a real value and then compound that with the fact that sales cycles are very long i know plenty of fintech companies that spend way more than 700 000 before they have a dollar of revenue so i understand where you're coming from but help us see the path right i mean how do you get to a million dollars a year in revenue yeah um [Music] right now where we're doing is basically just pushing sales uh right now this year this year is a sales year so you have a sales person there's a who's how many sales people on the team we have we have actually three people in the team that is uh there are sales and uh another six are engineering are the three sales people do they all have a quota yeah uh yeah we're we're working on that um on the quotas um the quota for this year was i would say very light it was just break even uh we are really what does that mean miguel break even quota yeah the breakeven quota is just getting two to three clients for the rest of year and i know it's not i will say it's not that um um it's not much but it's important to kind of set the set the the the company in a in a a in a stable ground miguel but that's not in my opinion that's not stable though that's that's like that's like ultimate sandbag three sales people and you want them to each add one new customer this entire year that pays a grand a month that's nothing that doesn't even pay their salary oh yeah that will do that will do that will pay their salary maybe maybe i'm explaining to will and um you're telling me you're telling me that you want to get three correct me here where i'm wrong you want to get three new customers this year in 2020 that each pay on average a grand per month so that's twelve thousand dollars per year that's the contract value that there's no way that covers a salesperson's salary even base salary uh yeah uh taking into account we are based in south america so salaries are are a little different from from the us so you pay your sales people less than 12 000 in terms of a base pay each year yeah that is base pay uh we we have um a very i will say um kind of uh competitive uh percentages commissions included in that and and also take into account i'm just talking about the minimum meaning that there's a lot of services that we can provide on top of that our last client just uh bring uh into into a company about uh 60k um so and and that is the license plus all the professional services that we provide so i i was maybe maybe i didn't explain too well but i was just talking about the minimums um but on top of that we do have a lot of additional services like the constructions of those rules i think that makes sense if you decided to stay bootstrapped and build a highly profitable sort of business but the second you take a million dollars of investor money that you've got to be growing at your stage way more than 100 percent year over year i mean you should have taken three grand a month up to thirty 000 a month in a 12-month period um so like i get the idea of professional services to help cash flow but you don't have a cash issue because you raised a million dollars like that cash is to build something you know obviously more scalable as i imagine what your vcs would say at a board meeting yeah um as i mentioned it's it was uh it was money to invest in the product uh i will say we are 90 product complete the product is very um very complete all the dream that we had like three years ago uh is now done the clients are actually uh very convinced that the prospects are convinced with the with the product the product is selling itself right now so i what do you mean miguel how is the product selling it's you have six customers over a two year period and you have three sales people and you want them to sell one new customer per year how can you say the product is selling itself because we in this year we just did uh three sales uh in where we did little to a little effort the client was the one actually looking for us like sending emails actually doing a buy if we didn't actually did much of a sale it was a it was a buy but i i understand your point and um [Music] uh yeah certainly this rest of the year we are going to probably push it a little further for for sales now that the product is complete what does churn look like today have any customers started paying monthly and then stopped no churn hasn't happened um this product generates a lot of stickiness because there is there is an investment in business logic from the client put into the product so it generates a sort of stickiness to the the client process yeah that that is an advantage to professional services up front is they're paying you a big chunk of money to get all the integrations done they're way less likely to leave after they've paid all that money yeah very good miguel well listen we're rooting for you let's wrap up here with the famous five number one favorite business book that fairest business book is uh zero to one by uh blake uh master champion steele that i will say is my favorite number two is there a ceo you're following or studying yeah right now is uh elon musk because of the drive i will say mostly number three what's your favorite online tool for building your company it will it will sound very kind of boring but it's it's google uh google apps the the google g suite uh it's it's very complete number four how many hours of sleep to get every night um yeah you wouldn't believe it but it's it's actually eight hours that's great i believe it what's your situation married single kids i'm married no kids no kids and how old are you i'm i'm very good i'm i and i'm 30 i'm 34. 34. last question what is something that you wish you knew when you were 20 years old well uh start earlier guys start earlier septenuil is a fintech play miguel is building started off and has a nice combination of professional services revenue and software revenue the software revenue is about six grand a month professional services four grand a month they've got again six customers paying right now they've raised a million dollars to do this he spent already about 700 grand of that getting the product where it is today now hopes to scale more rapidly so you can grow into that valuation churn is non-existent because the customer spends so much money getting the product integrated the stickiness is extremely high miguel thanks for taking us to the top thank you nathan